Post by
lifegoeson on May 08, 2022 2:17pm
Why hold certain companies long term and why selll others.
I am very pleased Tocvan continues to maintain tight control of its share structure and is only raising a small amount of capital at $0.80 at this time. This slow and prudent approach has the potential to reward shareholders if they can continue with drilling success. They are conducting a non-brokered private placement raising up to $346,200 with a full warrant at $1.40. In addition, they have introduced an acceleration clause whereby on any 10 consecutive trading days occurring after four months when the trading price is greater than $1.65.
TOC will still have less than 33 M tradeable shares after this raise and enough money to advance both Pilar and Picacho. This sets the stage for potentially raising money at higher prices, as well, this tight share structure will attract the more serious resource players as they tend to understand the upside potential of this approach.
Some have asked me why they don’t raise more money if Pilar and Picacho are such good properties. The answer to this question is complex.
In my experience, the approach used by companies to raise capital depends on these critical factors, 1) the initial share structure of the company/shell acquiring the property, 2) management’s intent and experience in managing previous companies and their ability to raise capital, and 3) more importantly the value of the property being acquired.
If you have been speculating on junior resource companies for a while you will notice they tend to raise capital at very low prices, generally below $0.10 because of the high risk exploring an untested resource. These companies go through a long and expensive exploration cycle of geological mapping, extensive sample collection, 3D magnetic studies, identification of drill targets and then finally drilling. At some point the number of shares will have increased significantly to limit further investment and the company is generally forced into a share consolidation, and I might add at great disappointment to existing shareholders.
I believe Tocvan is at the other end of the investing spectrum. What initially attracted me to invest in Tocvan over 2 years ago was the low number of shares, management raising money at $0.20, and the historical drilling on Pilar, i.e., about 17,700 m of drilling which included some excellent intercepts (61 m at 0.8 g/t Au; 16.5 m at 53.5 g/t Au and 53 g/t Ag; 13 m at 9.6 g/t Au; and 9 m at 10.2 g/t Au and 46 g/t Ag). Also, the overall perceived value of Pilar by the high acquisition cost confirmed that this property was sufficiently advanced to de-risk the play. I didn’t know the company or management at the time, but quickly found they had a plan in place to bring value to shareholders in a very methodical manner. I also researched other producing mines in Sonora Mexico and area around Pilar. Simply put, my bet is on management’s ability to control share structure while bringing value to shareholders by drilling and ultimately producing a compliant resource, similar to and potentially better than other very successful producing mines in the area.
TOC has conducted two very successful drilling campaigns since I first invested and is now in the middle of an extremely successful Phase III drill program, with over 22,700 m of drilling in total. The last core released two weeks ago got me excited in that it is a 100 m step out hole and potentially has sliced through part of the feeder system, significantly increasing the size of the resource in the Main zone. The last core produced 31.9 m at 2.4 g/t Au from 125.4 m with an excellent section of 9.4 m at 7.6 g/t Au and 5 g/t Ag from 144.8 m (also gold above to near the surface). There are four more holes to be reported, as well at the bulk sample metallurgical recovery studies.
After listening to several interviews with Brodie and his description of the Main zone and 4-T trend, along with the several maps on their web site, I can easily imagine a very robust and potentially large economic 43-101 compliant resource. Not sure how large this could be, but my optimistic mind says potentially north of half a million oz gold initially or maybe even more than 1 m oz. What is also nice is this is a near surface resource, and from all indications given the type of material and preliminary recovery roll studies, an open pit heap-leach mine is possible and economically feasible.
From the press release this week the proceeds of the raise will go towards the advancement of the Pilar and El Picacho Au-Ag projects in Sonora, Mexico.
At Pilar, results for four drill holes are pending. A Phase III program was initiated to define the extent of the established Main Zone, while continuing to explore several new prospective trends including 4-T. Advanced metallurgical studies are underway for bulk material across the property and will evaluate the recovery of gold and silver across mineralized oxide zones exposed at surface.
At El Picacho, surface exploration mapping and sampling has been ongoing to define future trench and drill targets.